The boundaries of today's Falmouth began to take shape in the late 1700s. Cape Elizabeth-South Portland separated from Falmouth in 1765, Portland left in 1785, and finally Westbrook split off in 1814. The reasons for separation were for practical reasons more than anything else. Population had grown by the 1760s to the extent that separate church parishes had formed, creating rival communities more attuned to local concerns. People also complained about the distance between outer areas and the center of the town in present day Portland.

From the 1760s to the 1940s, Falmouth would be a fairly typical rural Maine town, with the population consistently hovering around two thousand people. Most citizens engaged in farming or fishing. As can be seen even in the development of the town today, Falmouth is best understood during this period as a collection of neighborhoods largely lacking a coherent core. Human activity centered on the harnessed water power of the Presumpscot River, Piscataqua River, and Mussel Cove which drove sawmills, gristmills, and even a carriage factory in downtown West Falmouth. Masts had been initially harvested in Falmouth for the British Navy. Although the mast trade waned, a shipbuilding industry persisted in the town for years, launching tall ships on the Presumpscot River.

The extension of trolley service from Portland to Falmouth Foreside in 1899 catapulted the town into the modern era. Trolleys cemented Falmouth's economic connection to Portand and transformed the Foreside neighborhood into a relaxation spot for nearby city dwellers. Portland's Yankee elites relocated the Portland Yacht Club and Portland Country Club to Falmouth in 1885 and 1913 respectively, where they have remained ever since. To promote its line, the Portland and Yarmouth Electric Railway Company opened Underwood Springs Park north of Town Landing in 1899. The Park's attractions included a casino, hotel, and outdoor theater. Fire destroyed Underwood Springs Park in 1907 and was not rebuilt. The Lewiston, Augusta & Waterville Street Railway also ran up today's Route 100 in West Falmouth. People's growing preference for the automobile spelled the end for trolleys, which ended service in 1933.

Following World War II, Falmouth began to transform into the suburban community recognizable today. Military personnel who moved to the town while Casco Bay was "Base Sail" for America's destroyer fleet from 1941-1944 kick started this growth. Like many urban areas in the United States, the booming economy of the 1950s along with the mobility afforded by the automobile drew people away from Portland. Cheaper residential taxes and the desire for open space channeled this urban exodus into neighboring towns such as Falmouth. In the span of fifty years the town's population has skyrocketed from five thousand to over ten thousand resident's today. Falmouth's location on the ocean, along with its respected public school system, has made it one of the more attractive communities in Greater Portland. This demand consequently led developers to construct two additional country clubs in 1986 and 1988. The nature of such enclosed neighborhoods and other high-scale subdivisions like it has left an indelible impression on the once fairly rural community, initiating yet another transformation in Falmouth's 400 year history - this time turning it into one of the most affluent towns in Maine.